1) Framing the Issue

“Increase” disputes look simple but legally turn on why the increase exists and what prompted the withholding.

In Philippine labor law, an “annual wage increase” might be:

Statutory (mandated by law or wage orders)
Contractual (in an employment contract, offer sheet, policy with binding language)
CBA-based (collective bargaining agreement increases and step-ups)
Company practice / benefit (a regular, deliberate grant that ripens into a demandable benefit)
Discretionary / merit-based (subject to employer evaluation criteria)

A redundancy or transfer scenario can be lawful in itself, yet the withholding of increases can still be unlawful depending on source of the increase, non-diminution rules, discrimination/bad faith, and due process.

2) Core Legal Concepts You Must Know

A. Wage increases are not automatically due—unless a legal source makes them due

As a baseline, there is no general rule that employees are entitled to annual salary increases simply because a year passed. Entitlement arises only when the increase is:

mandated by law/wage order, or
promised by contract/CBA, or
has become a company practice/benefit, or
is a merit program that the employer must apply in good faith and without discrimination.

So the first question is always: “What is the legal basis of the annual increase?”

B. Statutory increases cannot be withheld by labeling a person “redundant” or “transferred”

If the “increase” is actually compliance with:

Regional Wage Board wage orders (new minimum wage rates; COLA, etc.), or
other legally mandated pay adjustments,

then it is non-waivable and must be implemented if the employee remains covered and employed during the effectivity period (unless a lawful exemption applies, such as those granted by the wage board/DOLE under specific rules).

Calling an employee “redundant,” placing them on “transfer,” or “restructuring” does not by itself excuse non-compliance.

C. Non-diminution of benefits (Labor Code, Article 100)

Where the “annual increase” is part of a benefit already being enjoyed, the non-diminution rule can prohibit withdrawal or reduction.

A benefit is most likely protected if it is:

consistently given over time,
deliberately given (not an error), and
not conditioned on a clearly documented and consistently enforced requirement.

Employers often defend by arguing the increase is discretionary or conditional. Employees typically succeed when they show that the “annual increase” is, in reality, standard and expected, given regardless of performance or with only nominal evaluation.

Key takeaway: If the annual increase has matured into a company practice, withholding it—especially only from a targeted group—may be illegal diminution and/or discrimination.

D. Management prerogative is real—but not absolute

Employers generally have discretion on:

job assignments,
reorganization,
promotions and merit pay,
performance systems.

But this prerogative must be exercised:

in good faith,
for legitimate business reasons, and
without abuse, discrimination, or circumvention of labor rights.

Withholding increases because someone is being edged out through redundancy, or punished for refusing an unreasonable transfer, can be attacked as bad faith and labor rights circumvention.

3) Redundancy: What It Is and Why It’s Often Linked to Withheld Increases

A. Redundancy is an authorized cause (Labor Code Article 298 [formerly 283])

Redundancy exists when a position becomes in excess of what the business reasonably requires (due to reorganization, decreased volume, streamlining, etc.).

Lawful redundancy generally requires:

Written notice to the employee and DOLE (commonly at least 30 days prior),
Good faith abolition of positions,
Fair and reasonable criteria in selecting who will be separated, and
Separation pay (typically at least 1 month pay or 1 month per year of service, whichever is higher, subject to rules on fractions).

B. How redundancy intersects with annual increases

Scenario 1: Employee remains employed through the effectivity of an increase If an annual increase is due by law, CBA, contract, or company practice, then the employee’s “redundancy status” does not automatically justify non-payment while the employee is still employed.

Scenario 2: Employee is terminated before the increase effectivity date If employment has ended before the increase becomes due, entitlement depends on the source:

Statutory wage orders: coverage depends on effectivity and whether the employee was still employed and covered at that time.
CBA/contract: check cut-off provisions, eligibility rules, and whether the increase is conditioned on being “in active service” on a particular date.
Company practice: if historically increases were granted even to employees under notice or near separation, that history can matter.

Scenario 3: Redundancy is used as a pretext to deny increases If redundancy is declared selectively or timed to avoid granting increases (or to target certain employees), the employee may argue:

illegal dismissal (illegal redundancy) for lack of good faith or criteria, and/or
money claims for withheld wage/benefit amounts, and/or
damages/attorney’s fees if bad faith is proven.

C. A common “pattern of illegality”

Red flags that support a challenge:

Position supposedly “abolished” but a new hire or contractor performs essentially the same work;
“Redundant” employees are mostly union officers, older workers, whistleblowers, or those who complained;
No objective selection criteria were shown;
Withholding of increases is applied only to the “to-be-redundant” group while they still work and meet eligibility.

4) Transfer: When It’s Valid, When It Becomes Constructive Dismissal, and How It Affects Increases

A. Transfer is generally allowed under management prerogative

A transfer (reassignment, relocation, lateral move) is usually permissible if it:

does not involve a demotion in rank or diminution of pay/benefits,
is not unreasonable, inconvenient, or prejudicial, and
is not used to punish or force resignation.

B. Transfer-related withholding of increases: typical legal issues

1) “You were transferred, so you’re no longer eligible” This may be lawful only if eligibility rules are:

written and clear,
known to employees,
consistently applied,
not discriminatory or retaliatory, and
not contrary to Article 100 (if it removes an already-established benefit).

2) “Your increase is delayed because you’re on a new role/grade” This can be lawful if it is part of a bona fide compensation structure (e.g., grade step system), but it becomes vulnerable if:

it results in diminution compared to what the employee had already earned by practice/contract, or
the transfer was forced/unreasonable and used to strip benefits.

3) “We transferred you because of redundancy; you should accept a lower package” A transfer used as an “alternative” to redundancy cannot legally function as a backdoor wage/benefit cut, unless the employee knowingly and voluntarily agrees and the terms are not illegal. Even then, waivers that undermine labor standards are scrutinized.

C. Constructive dismissal angle

If the transfer is so burdensome or punitive that it effectively forces resignation, claims may be framed as:

constructive dismissal, plus
money claims (including withheld increases), plus
damages if bad faith/harassment is shown.

Constructive dismissal analysis is fact-heavy: distance, cost, family disruption, safety, drastic schedule changes, loss of status, hostile treatment, and whether the employer provided real business justification.

5) Determining Whether the “Annual Increase” Is Enforceable

A. Checklist: Is the increase demandable?

Demandable when supported by:

Wage order/statute; or
CBA schedule; or
Employment contract / offer with definite increase; or
Written policy that uses mandatory language (“shall”) and consistent implementation; or
Established company practice (regular, deliberate, consistent grant).

Harder to compel when:

clearly labeled and implemented as purely discretionary; and
dependent on individualized merit criteria that are consistently applied; and
the employer can show documented performance/disciplinary bases.

B. Merit-based increases: you can challenge the process and fairness

Even if increases are merit-based, employees can contest withholding when:

evaluation is arbitrary, fabricated, or not supported by records,
standards were changed midstream to target a group,
similarly situated employees were treated differently without justification,
withholding is tied to union activity or complaint-filing.

6) Potential Causes of Action and Remedies (Philippine Context)

Remedies depend on whether the dispute is treated as a labor standards matter (unpaid wages/benefits) or a labor relations/termination matter (illegal dismissal, ULP, etc.).

A. Money claims: unpaid wage increases, differentials, and related benefits

If the annual increase is legally due, the employee may claim:

salary differential (difference between what was paid and what should have been paid),
impacts on 13th month pay, holiday pay, overtime, premium pay, SIL conversions (depending on computation rules),
legal interest (where awarded),
attorney’s fees (commonly where unlawful withholding compelled litigation).

B. Illegal dismissal (including illegal redundancy) and reinstatement/separation pay in lieu

If redundancy is invalid (no good faith, no criteria, position not truly redundant), remedies may include:

reinstatement (where feasible),
full backwages from dismissal up to reinstatement/finality (subject to case-specific rules),
or separation pay in lieu of reinstatement in appropriate situations,
plus other monetary awards.

Withheld increases become important here because “backwages” computations typically use what the employee should have earned, which may include increases proven to be due.

C. Constructive dismissal due to abusive transfer

If the transfer is effectively a forced resignation, remedies mirror illegal dismissal remedies, plus recovery of unlawfully withheld pay/benefits.

D. Unfair Labor Practice (ULP) angle (when union/CBA context exists)

If withholding increases is used to:

interfere with the right to self-organization,
discriminate to encourage/discourage union membership,
violate bargaining obligations,
or evade CBA commitments,

the dispute may be framed as ULP (facts must fit; ULP is not a catch-all). CBA disputes can also be treated through grievance machinery and voluntary arbitration depending on the CBA.

E. Retaliation / discrimination theories

Philippine law recognizes various forms of prohibited discrimination and unlawful retaliation in specific contexts (e.g., union activity, protected filings, certain protected statuses under special laws). Even outside special laws, bad faith targeting can support damages and strengthen illegal dismissal or diminution claims.

F. DOLE enforcement vs NLRC adjudication (where to file)

Practical jurisdiction guide:

If the claim is principally unpaid wages/benefits while employment subsists, it may be pursued via DOLE mechanisms (visitorial/enforcement powers) or via adjudication routes depending on the controversy.
If the claim involves termination, reinstatement, or complex factual disputes (e.g., validity of redundancy, constructive dismissal), it is commonly pursued through the NLRC.
Small money claims may fall under the DOLE Regional Director under the Labor Code’s small-claims-type provision (the statutory cap and conditions matter; if reinstatement is sought, it typically goes to NLRC).

Because forum choice can affect speed and leverage, lawyers often evaluate: ongoing employment status, complexity, need for reinstatement, and the employer’s likely defenses.

G. Mandatory conciliation/mediation (SEnA)

Many labor disputes go through Single Entry Approach (SEnA) for settlement facilitation before formal litigation. Settlement can include payment of wage differentials, correction of pay grade, separation package improvements, and neutral reference terms.

H. Prescription (deadlines)

Common limitations to keep in mind:

Money claims generally prescribe within a defined statutory period (often discussed as a three-year window for many wage-related claims).
Illegal dismissal has its own prescriptive period under relevant laws and jurisprudence. Exact counting can be technical (accrual dates, continuing violations, effect of SEnA/filings), so documentation of dates—effectivity of increases, notice of redundancy, transfer orders—matters.

7) Typical Employer Defenses—and How Employees Counter Them

Defense 1: “No entitlement; it’s discretionary”

Counter: Show binding source:

CBA clause, contract term, policy language;
consistent historical granting (company practice);
communications that made it appear guaranteed (memos, emails, townhalls, pay structure documents).

Defense 2: “Increase requires being ‘active’ on a cut-off date”

Counter: Attack inconsistent enforcement; show prior exceptions; show that the employee was still actively employed and working; argue ambiguity is construed in favor of labor in certain contexts.

Defense 3: “Redundancy justified the non-grant”

Counter: Even if redundancy is valid, it does not automatically erase already-earned benefits while employed. If redundancy is invalid, pursue illegal dismissal and include increases in backwages/differentials.

Defense 4: “Transfer reset eligibility/grade”

Counter: If transfer was involuntary, unreasonable, or punitive, argue constructive dismissal/abuse of prerogative and illegal diminution. If transfer was lateral, argue benefits should continue.

Defense 5: “Financial losses / business necessity”

Counter: Business difficulty is not a blanket license to unilaterally withdraw matured benefits; formal programs (e.g., restructuring compensation) must still comply with law and good faith, and statutory increases remain mandatory.

8) Evidence That Usually Decides These Cases

To prove the increase is due and wrongly withheld, the most persuasive evidence includes:

Payrolls and payslips showing prior annual increases
Company memos announcing across-the-board increases
HR policy manuals and compensation guidelines
CBA provisions and wage reopener clauses (if unionized)
Performance appraisal records (for merit systems)
Redundancy documents: org charts before/after, criteria, position abolition, DOLE notice, selection matrix
Transfer orders: role descriptions, grade mapping, change in duties, location, schedule, allowances
Comparator evidence: similarly situated employees who received increases despite comparable status

In redundancy disputes, proof that the role continued under a new title or through contractors is especially powerful.

9) Practical “Issue Spotting” Scenarios

Scenario A: “For redundancy candidates, the annual increase is frozen while they serve notice”

If the annual increase is statutory/contractual/CBA/company practice and the employee is still actively employed, freezing can be attacked as unlawful withholding.
If the redundancy itself is pretextual, add illegal dismissal.

Scenario B: “Transferred employees lose their step increase and are put on ‘probationary’ status for merit”

A true “reset” that strips existing benefits may be diminution unless validly conditioned and consistently implemented, and unless the transfer is truly voluntary and lawful.

Scenario C: “Employee refuses relocation; employer withholds increase then declares redundancy”

This can implicate constructive dismissal, bad faith, and illegal redundancy, depending on facts.

Scenario D: “Company practice annual increase, but employer says ‘we stopped it this year’”

Stopping a matured benefit can violate Article 100 unless the employer proves a legally defensible basis (and even then, the non-diminution doctrine is employee-protective and fact-sensitive).

10) What Outcomes (Awards) Commonly Look Like

Depending on the cause(s) of action proved, potential outcomes include:

Payment of salary differentials (with computation across covered periods)
Adjustment of 13th month pay and other pay-based benefits affected by the increase
Backwages (in illegal/constructive dismissal cases), potentially incorporating the increase if proven due
Reinstatement or separation pay in lieu
Moral/exemplary damages where bad faith, oppression, or malice is established
Attorney’s fees where the employee was compelled to litigate due to unlawful withholding

Actual awards depend heavily on: proof of entitlement, dates, payroll computation basis, and whether the employer’s conduct is found in bad faith.

11) Bottom Line Rules

No automatic right to annual increases—entitlement must come from law, contract/CBA, or company practice.
Statutory wage increases cannot be withheld by redundancy/transfer labeling.
Company practice and non-diminution can convert “annual increases” into enforceable benefits.
Redundancy must be bona fide (good faith, criteria, notice, separation pay). If used as a tool to deny pay rights, it can become illegal dismissal.
Transfers must be lawful and non-prejudicial; abusive transfers plus benefit stripping can amount to constructive dismissal and/or diminution.
Remedies commonly include money claims, and where termination/forced exit is involved, reinstatement/backwages or separation pay, plus possible damages and attorney’s fees.